As I've mentioned, Sam and I are in the midst of buying a house and
selling ours at the moment. Naturally, we've elected to do it just as
the Irish property market swerves off the road and wraps itself
around a tree. No doubt you're going to start reading stories in the
newspapers about the lessons of the Irish property market for other
markets in the same way that you've been told that the free market
reforms in the Irish economy are responsible for the meteoric growth
rate here while little details like National Development Plans,
centrally negotiated wage agreements and payback on the investment
put in by the EU over the last couple of decades are neglected.

Before anyone starts feeling sorry for us, let's have a quick look at
the consequences of the boom for us: we bought our house three years
ago, well into the boom, for €230,000. We will sell it for at
least €317,500. Not a bad profit over three years, and given
that we've paid off part of the mortgage we'll end up taking €
100,000 out of the deal. Of course, the house we're moving to also
costs much more than it did three years ago, so we don't win in the end.

What drove the boom here? Rapid economic growth in an economy with a
large proportion of young and not-so-young people who needed
somewhere to live coupled with changes in bank practices that made
lending criteria much easier to satisfy. Layer some speculative froth
on top of that from investors and you get the Irish property boom.
Supply couldn't keep up with demand, so prices rose and the investors
got excited so prices rose again.

This time last year we could probably have sold our house for at
least €350,000 - though the new house would also have cost more
- and in fact houses around here were priced at that level for some
time, which killed off the market. That price simply wasn't
supportable for a two-bed terraced house out in the suburbs. You're
talking about a mortgage of about €1,500 a month, which is just
too much.

Added to that is the threatened "reform" of stamp duty, which is a
tax paid by the purchaser on the purchase of a house (actually a tax on the contract...if you sell without legal backing or a contract then no stamp duty). There is an
election here this year and several parties are talking about
significantly reforming the tax. So everyone waited until after the
Budget in November, then they waited until after the Finance Bill in
February and now they're waiting until after the election.

Stamp duty rates can be quite high - as high as 9% on anything over €635,000 - and the
way they're calculated makes some price points very hard to sell at.
The consensus between estate agents is that our house is worth €
330,000. However, if you're a "first-time buyer" - someone who has
never owned residential property in Ireland - you are exempt from
stamp duty on properties of €317,500 or less. Thus, if you buy a
property for €317,499 it costs you €317,499. If you buy one
for €317,501 it costs you €327,026. This puts us in a
difficult situation: non-first-time buyers are putting off purchases
until after the election and first-time buyers have to pay an awful
lot more money to buy what is really a starter home. So we end up
selling at the taxation distorted price. Which means I won't be able
to afford a gold plated toilet seat in the new house, about which I'm
very disappointed.

Naturally again, the media are gleefully talking up the possibility
of a housing crash, exacerbating the problem and quite likely causing
one. I'm rather expecting our new house to be worth less than we paid
for it for a year after we buy it.

Incidentially, what would you say the consequences of a reduction in
stamp duty are? It will inevitably increase house prices by the
difference. If someone is willing to pay asking price plus stamp duty
then they will be willing to pay asking price plus lower stamp duty
plus the difference.

A lot of the faltering in the Irish property market is down to
electioneering and the details of the Irish tax system. I'm almost
looking forward to seeing what the international press have to say
about it.

Of course, the house we're moving to also costs much more than it did three years ago, so we don't win in the end.

Why can't people get their heads around this little fact? Someone's first home is not an investment, it's their home. It matters not one iota whether it gains or loses market value unless it gains well above the market average.

Well, there are two way to get a "home" ; renting and buying. Depending on the relative valuation of those two markets, one can be more interesting than the other.

Also, when putting oneself into deep debt to procure a home, there certainly is a risk when home loses value. Because certain circumstances in life might requires selling the home and getting out of debt ; and with high transaction costs, and high interest rates, a mortgage can mean ruin, especially if selling becomes hard.

We're entirely relaxed about the "return" on our house so long at it allows us do what we need to do: clear the mortgage on the old house, pay the stamp duty (35K!) on the new house and pay off some of the mortgage on the new house so we start of with a sensible loan-to-value ratio.

We have our investment money elsewhere.

However, if all your money is going into your house then you need to pretend that it represents wealth in some way or the other, which is only true when, and if, you can afford to downsize or move to a cheaper area.

Like many older people, technically my parents are reallly well off: they've lived in the the house they own for ages and have the mortgage paid - their net worth must be well in excess of half a million euros. In practice, unless they either want to move further from public transport and good medical care - not smart as you get older, especially if you've had any interesting health events - they can't really move or downsize much. The paper value of their house is worth nothing to them.

However, if all your money is going into your house then you need to pretend that it represents wealth in some way or the other, which is only true when, and if, you can afford to downsize or move to a cheaper area.

Well, if you're going to provoke me, I'll point out additionally that a lot of house buying is pure conspicious consumption.

The other reason we're relaxed is that neither the house we're buying nor the one we're selling are putting a huge load on our finances. By spending a sensible amount on our home, which is a form of consumption, we can afford to invest a reasonable slice of our income.

If we'd gone for the €750,000 house in a fashionable part of town rather than the much cheaper one in a respectable part of town we couldn't afford to invest or save anything. Or eat.

Where I come from (and this would be a country sharing many structural features with Ireland) there are lots of pensioners with paltry pensions and valuable houses, so that sort of thing is actually a great idea.

I know older people - not related to me, I hasten to add - who rely on their estate as a form of power over their children. Assurances from their children that they don't care about the money would be precisely what they don't want.

If I tried to tell my grandmother (or my mother) that she could borrow against her home and arrange to have more income (we'll ignore the fact that she literally counts every cent) she'd have me locked up for insanity! It's a matter of pride for a lot of people (old AND young)in this country to actually own their homes free of debt.

We are all in the gutter, but some of us are looking at the stars. Oscar Wilde

I'm still looking forward to (a link to) Chris Cook's diary about how to set up a house as an LLP. I don't understand it yet (I'm not good at tax laws). but from what he says, I think it'd meet many criteria for older people who would like to release some equity in their property without "giving the property back to the banks". I also think it'd have an effect if later illness(es) involve(s) various expenses, where at present the value of the property is considered (if I understand the situation correctly) an asset which can be used to pay for treatment--which leads to people selling their houses for treatment and spending all the money (down to £17,000?) on tretament, eg a nursing home. Not that those who can afford such expenses shouldn't or couldn't pay, but that under an LLP "wrapper" (even "wrapper" I don't quite understand!) the property would work in a different way so there would be different possible outcomes.

In France inheritance is along the direct bloodline which means that if Colman and I own a property in France and one of us dies that persons share (assuming owned jointly) is inherited by that persons living blood relatives. If we had children, the children would inherit. This means the surviving spouse now only owns 50% of the property. The kids own the other 50%.

If we bought our property through an SCI then we would own share sin teh company. The company would own the property. The shares can be left to anyone either of us wants to leave them to. So I could say that I wanted my shares to go to Colman or the-man-in-the-moon. The shares will nto go automatically to the bloodline relative.

We are all in the gutter, but some of us are looking at the stars. Oscar Wilde

Could you also write a will which stated "I wish my half of the property to go to Colman"? It's all so complicated, but I thought wills over-rode anything else--as long as the will is backed by paperwork etc...justifying the statements from the will.

So if you have a living blood relative (do brothers and sisters count? Where's the cut off point), you can't give all your money to the donkey sanctuary by writing in a will "I bequeath all my assets to the donkey sanctuary"?

If your domicile is England and Wales you can dispose by will of anything in England and Wales and any moveable property which you have abroad and you can dispose of it to whom you wish and to the exclusion of your family unless

you have restricted yourself by contract, e.g. by entering into an agreement to create and not revoke mutual wills; or
it is something which does not pass to your personal representative on your death, e.g. jointly owned property held as joint tenants; or
it is a contract in which your personality is an essential element, e.g. a contract to paint a portrait or to write a book; or
it is property you do not own (e.g. assurance policies taken out by you on trust for another) and over which you have not been given a power of appointment; or
the property has been 'nominated' and the nomination has not been revoked; or
it is property the disposal of which is restricted by its nature, e.g. some rights in immoveable property such as a personal licence or permission to use or cross the land of another, or shares in some small companies; or
it is your body; or
statute law restricts your right to dispose of it in the way you wish.

(Completely OT, when did people start spelling the verb "lose" [past tense: I have lost my donkey; present tense: did you lose your donkey?] as "loose" [adj: "Yr trousers are so loose, they're hanging below your bum" "It's the fashion, man. Get hip grandad." "You'd find it easier to walk and run if that's where your troursers were. Around your hips, I mean." "Man, you're not getting much are ya?" etc...] Did someone change the rules? Is it an american spelling? Can I publicly state that the verb which means "to misplace an object or other item so that you can't find it again" is To lose (and not toulouse) (or even too loose)

Re: my question about signing deeds over to the children:

One trap is to think that IHT can be avoided by passing over the deeds of your house to your children but continuing to live there. Regardless of the number of years since the gesture, unless you have paid a full commercial rent, it will be regarded as a "gift with reservation" and part of the estate.

I can't find any laws stating that you can't bequeath your property to whomever you wish. The "Make A Will" sites all mention that if you don't write a will, the blood-line rules follow, but they don't say that they still (at least in part?) over-ride the contents of the will.

I started seeing it written by americans. I assume(d) they wrote it because they'd never seen the verb "to lose" written down and then they saw someone (not our someone of course) write "Make sure you don't loose your map" and assumed it was correct.

But then I thought, "Surely everyone has seen the word "lose" written down? "Lose" and "lost" surely appear in children's books, not to mention the adjectives "loose" and "looser".

The knot started slipping
The rope became looser
He struggled and struggled
And said, "It was you sir,
Who tied me up tight
You thought "I win, he loses!"
But now that this rope is loose
Ah! See who chooses
To win or to lose!"

And with that up he stood
And the winner was the loser
And this rhyme is rubbish, I know,
But educational
Stop laughing at the back!

(Though I doubt if there are all that many parents reading bedtime stories to their children from screens just yet.)

(Though I could be wrong. 'Tis fascinating watching the wheel of time turn and realise that yes, what you thought was one of the "facts of life" is, in fact, soon to be part of "What they used to do", where "they" means "me".)

I used to write "lead" as the past tense of "lead". I don't know where I got the idea from. I thought "led" was american. But there's no way of reading "lead" as a verb without hearing the "ee". He lead them up to the top of the hill...

By the Inheritance (Provision for Family and Dependants) Act 1975 certain family members and other dependants can make a claim against your estate if you don't make provision for them in your Will.

Surviving spouses and civil partners are in a special position in that the court may well order that they should have a "fair share" of the family's assets which, in a wealthy family, may be a great deal more than only sufficient to live on. Ex-wives (and indeed ex-husbands) are also entitled to claim so long as they have not remarried. They are quite likely to receive something if there was a maintenance order at the time of death, but not if there had been a "clean break" at the time of the divorce.

Other members of the family who were dependant on the deceased, e.g. children, may claim a share of the estate if the Will does not give them one, but they are not likely to receive a higher sum than "maintenance". "Children", incidentally, can be any age at the time of their parent's death, not just minors.

The other main class of person who can claim under the Act are cohabitees -- defined as living as husband and wife for 2 years or more at the time of the death. In this case, the cohabitee does not need to have been strictly dependant on the deceased in order to receive provision.

The main purpose of making a Will is, of course, to ensure that your wishes are carried out after your death. If there is a possibility that the provisions of your Will may fall foul of the Inheritance Act, yet you have good reason for what you do, you can set out your reasons in a special document called an Inheritance Act Statement. For instance, if you have given their "inheritance" to one of your children during your lifetime and want to exclude that child from your Will, you can say so in the statement. While Inheritance Act Statements are not binding on the court in the event that your Will is disputed, the court is more likely to rule in favour of upholding the provisions of the Will if it can see that you have a reasonable motive for what you do.

From Sam's post-course rants on the topic - during the period she spent studying inheritance law for tax exams there were some fascinating dinner conversations - there is some really ugly case-law here where people bring up all sorts of presents, trips and differences in clothing or whatever that their siblings received when they're challenging wills. Incredible stuff.

Bloodline goes as far as they can stretch it. For example...Look at that story recently about the French Royal relative in India. As far as I can remember...if a person in Ireland dies intestate an dthey can find NO bloodline relatives then the State becomes the beneficiary of their estate!!

If they have a will and leave everything to the donkeys then so be it...unless a blood relative pops up and successfully convinces a court that they are entitled to something!

We are all in the gutter, but some of us are looking at the stars. Oscar Wilde

In Ireland spouses inherit from each other tax free and once the estate passes to the kids each kid has a threshhold up to which they can inherit from parents of in excess of 478k (increases slightly each calendar year). Anything over that is taxed at 20%. In the UK there's a exemption limit on the entire estate value up to £255,000. After that tax is payable on the remaining value at 40%.

So...you when buying your property abroad you need not only a will in that country, but also proper tax and legal advice...otherwise that stack of treasure you were hoarding starts to be eroded by the wrong people...

We are all in the gutter, but some of us are looking at the stars. Oscar Wilde

Which is then not an issue because both spouses are dead - but if a surviving spouse has a partner what happens there? Can the shares be transferred to the non bloodline partner on death of the remaining original spouse?

We are all in the gutter, but some of us are looking at the stars. Oscar Wilde

In swedish law children has the right to (at least) 50% of the inheritance, divided equally. For example, if you are one of four children you have the right to at least 12.5%, while if you have only one sibling, 25% will be yours for sure.

Surviving spouse has the right to "unmoved living" (orört bo), which puts a lower limit on how little she (or he, though it is more common that men die first) can be left with. The rest will then be inherited upon the surviving spouses death.

It gets really complicated when you have children who share only one parent.

Something like that, only expanded. There are three main roles in an LLP. Assuming on "outside" investor, then the interest parties would be:

Parents

Children

Renter

At present, the property is the parents'. They could, I suppose, sign the deeds over to the children for 1p or 1 cent or somesuch. There are laws about doing this within a specified period before death, but if parents were to do this when they hit sixty, then I'm supposing the property would be the childrens'. But there may be legal issues around that.

In the LLP model, I assume the property becomes the LLP, then the parents and the children take on specific roles (maybe there needs to be a third person, a solicitor of some kind or just a friend of the family?, who "manages" the LLP. There would be (....fill in the blanks because this is what I'm missing...) and so, when the surviving parent, say, needed or decided to move into sheltered accomodation, a tenant for the property could be found and that tenant would (...fill in more blanks here...) meaning that money for the sheltered accomodation was freed up, no selling of the property was necessary and (....more blanks here related to inheritance tax and other such matters...)

Hence my request for a diary or maybe links to something that would fill in these specific blanks. An real example hopefully, with info. on

a) The necessary legal wherebywhats
b) The various "agreements" between the parties (and associated legal wherebywhats

and I'm already confused!

Thing is, a lot of us will find ourselves in this position either as parents or children, and I'm all for ET developing beyond just 'aving a chat (which I enjoy mucho) and into...well, developing our ideas of "ways forward" into practical action beyond the type type read read. And the LLP-House scenario seems to me to be one of those possibilities.

Growing indoor herbs might be another...

Also, "How to sort out your business so you only have to work six months a year....and can then use your super-duper international rail ticket to travel lazily from place A to B imbibing....other places and other...er....imbibable...er...imbibes....ach...

So, I'm hoping that Chris can help out, even if just to paint a wide picture--just enough for me to see how it might help, eg, me when I am old and doddery (next Tues week, I think.) I would, of course, be happy to pay Chris or A.N. Other-Expert a decent rate for any hours they could put in to help me actually set up such an LLP, but for now I'm still at the "I like the idea but...I don't quite understand it" stage.

But you still have family "Occupiers" and "Investors" plus a "Trustee", where you may bring in someone you trust (even a solicitor - if they would do it) in case people go under buses etc.

Individuals eg Mummy and Daddy, could be Members of all three stakeholder "groups" while other family members may only be Investors (especially when Junior leaves home, or when Mummy and Daddy get divorced).

So who needs a "pre-nup", or even a will?

You can extend this "family corporation" to acquire a property in which Junior lives etc etc

In the LLP ownership and control do not go together as in Companies.

I think it will be particularly interesting to family businesses who always have the problem of passing the family biz down through generations while retaining control.

Or of bringing in competent managers and keeping their interests aligned with those of the family.

Or of letting outsiders invest so that some family members can "cash out" yada yada

An LLP is limited only by one's imagination.

"The future is already here -- it's just not very evenly distributed"
William Gibson

a straight corporate setup with shares etc. LLC just simplifies the paperwork perhaps.

There are plenty of corporations with 2 classes of shares -- some voting, some non voting. Ford Motor is the biggest example I can think of. The Fords only own about 10% of the company, but have a much greater piece of the voting stock.

Not dissing LLCs as much as failing to see the big advantage in re-labeling.

All Ford is doing is splitting ownership between two classes of financial investors. The company is otherwise structurally no different from any other as between the relationship between owners and everyone else aka "costs".

The difference is that the "Capital Partnership" variant of LLC's and LLP's brings the investors and users of investment on the same side.

The "Principal/Agency" problem of "the Corporation" - which requires the whole panoply of Company Law, Sarbox and all the rest - simply does not exist in this model.

If you need any evidence of the attractiveness of such a structure to investors you only need to look at the phenomenal growth in Canadian Income Trusts, which now extend to virtually the entire Canadian capital market.

This occurred despite the tax issues, management issues (an entrepreneurial trust is an oxymoron) and the complexity and costs of trusts (which is why accountants and lawyers love them).

Investors demonstrably like to share the Gross revenues with the management.

Would you rather drink the water before it goes into the bath, or after it comes out of the plug-hole?

"The future is already here -- it's just not very evenly distributed"
William Gibson

The reason the "Land Partnership" changes the game entirely is that it enables that bundle of rights and obligations we think of as "property" to be bundled and shared around in entirely new ways.

ie an entirely new form of tenure of indefinite duration - an "evergreen lease" - whereby for as long as you rent the Land and the Capital invested in it you pay an agreed "Capital Rental".

It also means that "Real Property" need never be bought and sold again, although "Occupiers" and "Managers" of it, and Investors in it, may change over time.

The key is that the "freehold" is put into "Trust" with a "Custodian" Member of the LLP or LLC - exactly in the same way that massive firms like State Street and Northern Trust act as "custodians" of shares while the "beneficial interest" is traded increasingly furiously on the casino's we call Stock Exchanges.

Having done this it is merely a question of who lives in the property, who invests in it, who manages it and what the relationships are between them.

French Law is interesting in respect of inheritance, and it would be interesting to see how this structure would intersect with it, with the property itself in trust.

This wrapper offers a neat IHT mechanism in that it is possible to transfer "Equity Shares" to one's kids and then to pay a "Capital Rental" to them (if you don't the Revenue will tax you on the benefit) and continue to live there.

But hey, that's no problem if you actually pay them not in cash but in more "Equity Shares".

The problem comes when you want to move. You have to convince the new "Occupier" to take on this radical new mechanism.

Well, when you tell him that all he needs to pay is an agreed "Capital Rental" - that if he pays more he starts buying "Equity Shares" in the property and that the outcome is much cheaper in cash terms - BECAUSE HE DOESN'T HAVE TO REPAY LOAN PRINCIPAL - then who knows, you might even get people interested.

If not, just rent it out conventionally and rent somewhere else. The model interfaces perfectly well with the existing mechanisms.

"The future is already here -- it's just not very evenly distributed"
William Gibson

The owner pays his "Capital Rental" not in cash but in more "equity shares".

If you run the spreadsheets the result is much less toxic than the other options: "reversions" (where the investor takes a punt on how long Granny is going to live) and "roll-up" mortgages at 2% over building society base rate, where the interest rolls up and (at today's rates) the mortgage doubles in 10 years.

So in the perfect world a pensioner could go to his pension fund and have it invest in his home.

For the pension fund it's a REIT clone (LLP's being tax transparent), but simpler and without the management conflicts of the REIT's the Treasury came up with.

Each pension fund could have stakes in a "pool" of its pensioners' properties.

For the pensioner it's the most equitable form of equity release there is.

It's a pity the Chancellor made it impracticable for UK pension funds (I won't bore you with the technicalities).

But that leaves the field wide open for overseas funds - particularly petrodollars looking for a GENUINELY Islamic home - unlike most of the hypocritical crap sold as "Islamic" investment at the moment.

There is over £1 trillion in UK property owned by the over-65's free of mortgage, much of it (unlike public housing rapidly being brought up to "Decent Homes" standards)falling into disrepair because the occupants can hardly afford to live, never mind maintain their homes in good repair.

In Newham, I understand maybe 40% of properties fall into this category.

"The future is already here -- it's just not very evenly distributed"
William Gibson

Alternatively, you can buy the space for, say, £250k and pay the £18k/yr in mortgage payments.

Is there a non-toxic way to raise the £250?

One could value the business at £750k put it in trust, sell £250k worth of "equity shares" to buy the property, and pay 1/3 of the revenue (the total of "rent" and "profit" above) to the holders of the equity shares.

At the other extreme, one could value the business at £1.39M, put it in trust, keep £210k worth of equity shares for oneself, and sell £250k worth of equity shares to outside investors. This results in paying 18% of the revenue to the external holders of the equity shares, and 15% to oneself.

In the first case, the equity shares have an expected return of 13.3%, and in the second of 7.2%

Am I totally off?

The problem, in any case, is finding people who, collectively, have £250k to spare. The mortgage solution just requires (say) £25k, together with the "bank magic" of (say) 10% "reserve requirement".

you can't just "value" a business at 750K or 1.4MM. You have to find someone willing to take the other side of such a valuation (ie an investor who agrees that the business is worth that much and buy some % at that valuation). With a profit of only 15K/year and a building worth 250K, I don't think too many investors will be excited to cough up the rest of those large sums as "goodwill". Those ROR calcs are meaningless unless you can find someone who will accept the risk on that basis.

There is no "bank magic". They are taking titular ownership of the building in exchange for 250K of depositor/bank stockholder cash. The money doesn't come out of thin air despite what the anti moneylender crowd say. To create leverage, banks have to borrow too. Perhaps it's a house of cards, but there is no magic.

What makes borrowing 250K to buy a building from its owner toxic? Paying interest? In that case is paying rent to a landlord also toxic? Getting the use of something without buying it or making it yourself costs something.

Why can't people get their heads around this little fact? Someone's first home is not an investment, it's their home. It matters not one iota whether it gains or loses market value unless it gains well above the market average.

It makes a huge difference if you move to a cheaper area. Prices are still climbing in my village because of London types who have made a couple of hundred K over the last couple of years - which makes for a very handsome deposit in this part of the world. So they can move here and get much more space, for less money.

If you're stuck in London that isn't an option. But a good percentage of London types have at least some mobility, so the effect can spread.

There's also the holiday/weekend/foreign home syndrome, which spreads the price rises even further to other properties which aren't a main home.

In any case hyper-inflation in the property market means that inevitably you get a lot more speculative buying.

I have a friend in Kensington with a neighbour who bought a two bed garden flat for around £370k and is trying to sell it for £500k six months later.

You also get a lot of builder types who get in at the start of the bubble by buying cheap old properties, spending a minimum on doing them up, and then selling for a comparatively huge cash profit, which can be used as a deposit to repeat the scheme in a different cheaper area.

A few rounds of climbing up the ladder like that and you can do very nicely for yourself.

So as soon as you get a bubble, you get significant market distortions because the proportion of people buying to live, as opposed to buying for profit, starts to decrease significantly.

in 1990. Builder spent L400ish on a 3 story detached house on the edges of Hampstead. Spend quite a bit on converting to 3 flats with decent cabinetry etc.

Bottom fell out and he was left holding the bag renting at roughly 1/2 the cash flow necessary to buy the flats. Was happening all over. Saw another in Ealing that was on offer at L200K. Finally sold at about L140. Ugly for the spec builders. I hope that bastard lost a bundle after the way he jacked us around.

Because we neither need to nor does it make much sense for us to do so.

We'd have more or less the same monthly outgoings anyway, with all the difficulties and insecurities of renting in the market here, and in the long term I don't expect the drop in property prices to be sustained. I'm guessing an outer limit of 10% or so followed by a spike once the stamp duty issue is sorted out and then slower growth thereafter that'll mean we'll be ahead within a year or two.

It is actually harder to trade up in the "down market" here...the banks are watching the media too. They see 'house prices fall...property market slow' etc etc. They are now including conditions in mortgage documents requiring the customer to have Sale Agreed on their own home before they will allow drawdown of the mortgage for their new home. This then either creates a long chain of people waiting on the purchasers of their home to sell their respective home or vendors refusing to sell to you until they receive a letter from YOUR bank telling them that YOU have been sanctioned for a mortgage and bridging!

We are all in the gutter, but some of us are looking at the stars. Oscar Wilde

saw this in the UK in the early 90s. Happens here too but to a lesser extent. From what I've seen in the US, people sell then either rent back or use a longish closing (90-120 days) to find the new home with a virtually done deal on their sale side in hand (contingencies cleared etc). It's always tricky trying to get a chain set up as most people don't have enough capital to own 2 houses at once. Contingent sales are always a pain in the ass for all concerned. Even worse in places like the UK where the paperwork is much more cumbersome.

But my point wasn't that trading up isn't tricky, but rather price cutting tends to be proportional to price so you want to move up in price when the market is weak.

we don't have that sort of fee in the US in most jurisdictions. I remember it pissing me off when we bought a house in the UK. But you got to pay somewhere/somehow and I could hardly cry poverty at the time.

Still transaction costs are ugly. We often pay far higher real estate commissions (5-6%) + loan fees, title insurance etc such that between buyer and seller as much as 10% extra is spent.

100% agree that step changes are stupid as someone said in this thread.

I've never owned any house. I did live 4 years in a beautiful old huge Prästgård (vicarage) which was owned by my ex-wife. And thanks to the pre-nup, it wasn't in any way mine.

Otherwise I've rented or leased - usually 3 years at a time: which is the furthest I can think ahead. Fortunately I have a taste for 'unusual' properties such as industrial buildings, and have always found good deals. They usually mean a few weeks of self-building to put them in shape. But that I enjoy too.

Neither do I own a car or a computer - everything is leased. I don't own any stocks or shares, except in the companies in which I am active. The only things I own are some treasured furniture (Bilnås), clothes and books - and me.

I hate thinking about money. When I don't have enough, I work a bit harder. When I hit a winning streak, I take some time off and work on pet projects. I also have no intention of retiring. What's the point? I enjoy what I do - there is no real separation between 'life' and
'work'. To me, that is the real luxury.

Back in the late 70s the property values in the warehouse district of LA, near the commercial railroad complex, had collapsed. The warehouses had been built when 4,000 - 6,000 square feet was a lot of space. As time moved on these became uneconomical as more space was required and the transportation system moved from railroading to trucking. At the time I'm speaking of these warehouses were going for absurdly reduced prices compared to the purchase/rent costs in the rest of the basin. The disadvantage to the properties was the unique atmosphere generated by life in LA. We're talking smog. cough, hack, wheeze

Since nobody wanted them, the dregs of society - artists - started buying and moving into them. The advantage was a large open space usable for studios and a second floor for living. In the normal course of events the artists would attract patrons attracting resturants, boutiques, & etc attracting more people attracting people who want to live in the area raising the property values raising the property taxes and driving the artists out.

I moved to NoCal shortly afterwards and, from time to time, wondered what happened in the long run.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

My favourite was 4 room caretakers apartment (semi-circular!) in an industrial building used when I was there by a firm of removers for storage. There was presumably once a need for a 'watchman' in the original plans for the building. Underneath and connected, was a huge room that housed the original steam heating system. It made an excellent open studio.

But the best of all - as with all industrial areas - is that I could play music very very loud ;-) As an ex-record producer I like to listen in control room conditions. I still have those house-shaking speakers and amps from an old studio at home today. Sadly though, 3am sessions with Dark Side of the Moon are now a thing of the past...

Incidentially, what would you say the consequences of a reduction in stamp duty are? It will inevitably increase house prices by the difference. If someone is willing to pay asking price plus stamp duty then they will be willing to pay asking price plus lower stamp duty plus the difference.

Probably, but isn't there the other side of the transaction as well? Some seller was willing to sell for 317,501 pounds, so he still would be ready to sell for that, wouldn't he? It's a competitive market after all, and you're competing with other sellers who are selling their houses. Seems likely it could end up in between. But one likely will never really know, because you don't know what you would have sold it for, and there are other factors in an ever changing marketplace of buying and selling.

Naturally again, the media are gleefully talking up the possibility of a housing crash, exacerbating the problem and quite likely causing one.

Isn't this the truth for all the press everywhere. They seem to always be rooting for some catastrophe. I feel that way in the US today. We're having a housing slowdown, but the press loves to paint the picture of a housing crash that will carryover to the rest of the American economy, causing a recession, or maybe even depression. But wait, some of the comments and diaries on ET seem to root for the same outcome,,,,don't they?

But wait, some of the comments and diaries on ET seem to root for the same outcome,,,,don't they?

We do indeed, sometimes, to finally have a chance to show the frauds the neolibs are. Of course, then sanity comes back, as we know that (i) the crash will hurt the poor first and (ii) the neolibs will find a way to blame it on lack of "reform".

As long as we have a media that cares little about facts, and cares so much about "process" and perceptions, little that can be done.

There is much "perception" behind indeed. In effect, we have - gasp - a social agreement of how we play the market game. As long as everyone agrees that a market is going up and that people will keep buying ever more pricey assets, everything will be going fine... except that there need to be ever more buyers. A collective illusion can go far, but not infinitely far.

But besides facts and perception of facts, we have numbers. They keep "surprising" WSJ analysts a few months in a row.

In practice we have tacitly agreed, as a rule, to fall back on what is, in truth, a convention. The essence of this convention--though it does not, of course, work out quite so simply--lies in assuming that the existing state of affairs will continue indefinitely, except in so far as we have specific reasons to expect a change. ...

Nevertheless the above conventional method of calculation will be compatible with a considerable measure of continuity and stability in our affairs, so long as we can rely on the maintenance of the convention.

For if there exist organised investments markets and if we can rely on tthe maintenance of the convention, an investor can legitimately engourage himself with the idea that the only risk he runs is that of a genuine change in the news over the near future, as to the likelihood of which he can attempt to form his own judgement, and which is unlikely to be very large. ... Thus investment becomes reasonably 'safe' for the individual investor over short periods, and hence over a succession of short periods however many, if he can fairly rely on there being no breakdown of the convention and on his therefore having an oportunity to revise his judgement and change his investment, before there has een time for much to happen. ...

... But it is not surprisingthat a convention, in an absolute view of things so arbitrary, should have its weak points. ...

I do not think that old people are the problem. They still know how to earn a living in harder ways. It is younger people that may have too much expectations that things can go easily indefinitely. Similarly, "new" people from emerging economies might be the biggest enthusiasts of the boom[&bust] game. They just learned the way to get rich... No one is educating them anything else.

I don't mean "old people" as in "elderly". I mean that the people who embody the current cultural norm that you decry have to die off (or become outnumbered and be overcome) before the cultural norm can go away and be replaced by a new one.

I wonder, does the ecosystem of cultural norms has to be dominated by a few dominant norms, one for each aspect? Do weaker cultural norms have no means to "remain themselves" and form an opposition to a dominant norm? The ecosystem of living styles seems to be very Jurrasic (or even pre-Cambrian) at the moment: everyone aspires to be more among top few percent most powerful or affluent; no one "knows" how to survive happily with the satisfaction you have.

Another example: the "old culture" of a job for life and a single "career" that starts with your choice of university degree is being replaced by something new. The old generation won't unlearn their ways and a sizeable proportion of the new generation has learnt that cultural norm all too well. So the old generation needs to die off and the part of the new generation embodying the old mores have to be outnumbered before a new cultural norm more adapted to the current economic context can take center stage.

With respect and best wishes, but did you feel much better a couple of months ago when any concern of housing markets problems (particularly, of subprime mortgages) was laughed at loudly? Would you trust the same "responsible" voices now?

But that is not quite accurate. While there is always a diversity of opinion on future financial events,( afterall there had better beecause you can't have much of a market if everybody thinks the same thing--what would happen if everyone agreed that Johnson and Johnson was worth exactly $6 today. who would buy and who would sell?), the major issue in American forecasting of home prices for the past year has been will there be a housing slowdown or will it turn into a housing crash? Im sure there must have been someone saying not even a slowdown, but I don't recall them. and even on this site that has been the issue,,,,at least in dialogues I have been involved in.

and in conjunction with that, the economy has been slowing for months, and that has been expected. but once again there is a group that expects an outright recession, a smaller group that expects a depression, and probably the largest group that expects just a slowdown.